Foresight for freight: how automotive companies can build more resilient supply chains

 

Intro

Today, a typical passenger vehicle is made up of 30,000 unique parts. They need to be delivered just in time for the assembly line, in a highly choreographed sequence, from suppliers spanning the globe. In turn, each of those part-makers has its own complex supply chain. A small delay in the manufacturing or transport of a single part can create major—and costly— delays.

The tiered nature of the automotive supply chain often creates silos, increasing the risk of disruptions rather than ensuring a reliable and resilient supply chain. Having a strong, flexible, integrated supply chain from upstream raw materials, across tiered suppliers, OEMs and the aftermarket is critical.

“Auto manufacturers and the thousands of tier 1 and tier 2 part-makers that feed them need reliable, resilient supply chains now more than ever,” said Jim Mancini, Vice President of North American Surface Transportation. “The automotive industry is seeing an increase in nearshoring, the rise of electric vehicles, and sustainability pressures. And that is happening as global supply chains are growing increasingly complex, with more frequent and more intense disruptions.”

This paper, in collaboration with C.H. Robinson, explores four key areas of automotive logistics that can help ensure a consistent and timely flow of inbound raw materials, components, and parts for production:

• Enhancing end-to-end supply chain visibility
• Consolidating shipments across ocean and land
• Minimizing cross-border disruptions and delays
• Expediting critical freight smoothly

 

1. Enhancing end-to-end supply chain visibility

Many automotive companies lack visibility to aspects of their supply chain, including legs of transporting their raw materials, components, and parts. Blind spots can easily exist.

Suppliers may use visibility tools that vary in the usefulnessand accuracy of their freight tracking updates. Freight often moves via different modes, with visibility gapping between ocean, air, rail, and truck transport. And when an automaker’s many suppliers use different logistics companies to deliver their inbound freight, there’s often little ability to see across all those suppliers and make meaningful improvements to their supply chain as a whole.

A logistics provider that specializes in automotive supply chains and is equipped with information-rich input and the right technology can significantly improve end-to-end visibility.

The right technology does much more than tell you where a shipment is. It provides predictive analytics to quickly identify potential disruptions before they occur and configurable alerts that can zero in on the most time-sensitive, highest-value, or highest-risk freight. A plethora of alerts won’t matter if the critical ones don’t stand out to get the necessary attention. The most advanced visibility tools also produce highly accurate predictive ETAs, using algorithms that take into account a vast amount of historical data on the shipping lane and the specific pickup and delivery locations, paired with inputs on real-time conditions.

Predictive analytics and ETAs enable logistics providers to immediately intervene and keep shipments on track. Look for a provider that has integrated ocean, air, rail, and truck services. That way they can flex between delivery methods and even flex between ports, routes, and carriers to mitigate disruptions, while still maintaining seamless visibility.

Visibility to inbound, transfer, and outbound freight can be further enhanced if the logistics provider is capable of aggregating shipment data and alerts from multiple suppliers, geographies, and transport modes into one unified information stream.

Looking further upstream in the supply chain, purchase order (PO) details can help you achieve even more granular supply chain visibility—down to the item level.

• Share PO information for optimized shipping
  When an automotive company shares their POs for goods before they need to move them, it surfaces the opportunity for a logistics provider to plan for optimal transport mode, route, and carriers by the item.

  This can lead to broader efficiencies such as proactive exception management, higher trailer utilization, and better drop trailer positioning. It can also create savings by reducing expedites through the earliest possible notice when quantities or requested dates are not going to plan. And once goods are in motion, it is also easier to maintain item-level visibility at key points like transloading—when an international shipment arrives at port and items from ocean containers are put onto trucks with different destinations.

  Advanced PO planning that includes optimization and capacity shopping can significantly inform and influence supplier activities. This approach can drive down costs and carbon emissions while enhancing delivery reliability and carrier performance.

• Integrate POs for broader inventory visibility
  Suppliers are often serving their end customers from multiple warehouses, each with different warehouse management systems. By integrating purchase orders through these warehouses into one common inventory on behalf of an automotive supplier, logistics providers can establish common data sets to track total inventory levels, what items have been ordered, and what items have shipped, as well as what quantities are in motion, and what quantities are at rest.

• Use PO details for continuous improvement
  Comprehensive item-level information—such as cost of goods, fill rates, and delivery dates and times—can be extracted from POs to create a scorecard for measuring suppliers. Such a scorecard can be used to monitor and improve supplier performance and delivery compliance. From there it’s possible to determine the total landed cost at the item level, inclusive of both the product and supply chain costs. Over time, this removes friction from your supply chain by sticking with suppliers that reliably deliver the best parts at the best cost.

2. Consolidating shipments across ocean and land

Freight consolidation is a good strategy for automotive companies looking to gain flexibility in their supply chains, while supporting both planned and unplanned shipping needs

Tier 1 or tier 2 parts suppliers have the ability to consolidate both their inbound and outbound shipments. OEMs can consolidate their inbound materials out outbound aftermarket parts. A logistics provider’s ability to consolidate freight with that of other suppliers headed to the same warehouses or assembly plants combined with optimization technology and multimodal solutions can deliver multiple benefits.

• Increase efficiency:
  If seven different suppliers are each regularly sending a less than truckload (LTL) shipment once a week from San Luis Potosi to an automaker, those could be consolidated into one truckload. That’s six fewer shipments for the automaker to manage on their dock or track in their system. Conversely, if a supplier regularly ships by truckload but is consistently not filling the trailer, it’s possible to eliminate that waste through consolidation

• Reduce costs:
  When truckload rates are favorable compared to LTL rates, consolidating LTL shipments can be cost effective. When ocean shipping rates are rising, take advantage of a logistics providers’ ability to maximize container utilization.

  That can be in the form of a parts-maker using less than container load (LCL) shipping and having freight consolidated into a shared container, paying only for the space used. Or through a more extensive analysis of trade costs when an automaker has suppliers in the same region with LCL shipments around the same time.

  In addition, as the consolidation network grows, the logistics provider can better leverage container volumes and warehouse space, offering even more competitive pricing. The size of the freight consolidation network also brings stability and predictability, allowing providers to plan and allocate capacity and labor

• Meet sustainability goals:
  Quite simply, decreasing the number of shipments or eliminating wasted space in trailers and containers decreases CO2 emissions. A more efficient supply chain is by nature a more sustainable one. This is especially true if the logistics provider helps segment freight and can shift some of it to less carbon-intensive modes of transport, such as rail versus truck or ocean versus air.

Look for a logistics provider that is skilled in supply chain analysis and design, has the deep relationships across the automotive supply chain to make more consolidation possible, and can manage the complexities of consolidation. For example, each country sets its own trade rules. If just one government agency that regulates imports places a hold one shipment in a trailer or container, all shipments in the consolidation go on hold.

Automotive shippers importing to the United States may want to consider customs entry consolidation. Not only does it mitigate the risks of freight consolidation, some importers can save millions of dollars in import fees annually.

3. Minimizing cross-border disruptions and delays

As nearshoring continues to grow, automotive companies should be cognizant that infrastructure like roads, commercial bridges, and lanes at border crossings are not growing at a commensurate pace. Likewise, the pool of carriers to serve the shipping needs of manufacturers across borders is also not growing as fast as the demand. Whether a shipper already has interests in Mexico, is expanding there, or relies on suppliers in Mexico, it’s likely time to revisit cross-border shipping strategies

• Rely on local experts positioned in all the right places
  Teams on the ground in key automotive manufacturing hubs in Mexico and on both sides of strategic border crossings understand the rules, regulations, and culture at the border, and can make all the difference for your supply chain.

  Consider the nuances of getting a shipment across the Mexico border. Unless shipping directly, it typically takes three trucks: a Mexico carrier brings the trailer to the border, a Mexico transfer carrier takes it across, then the freight is and reloaded onto a U.S. carrier’s trailer. Don’t trust just-in-time parts delivery to a logistics provider that can only pull that off at one crossing.

  In order to mitigate the variability of the border in times of disruption, whether due to technology issues, DOT inspections, inclement weather, or geopolitical unrest, it’s important to have options for diverting freight to other points along the border to avoid the lines of trucks backed up for miles.

• Speed up border crossings with access to the right facilities
  The process of unloading freight after it crosses the border and reloading it onto a U.S. carrier’s trailer happens at crossdock facilities. With the growth in nearshoring and cross-border loads—with more to come in the years to come—the crossdock is a premium space for shippers to boost throughput. Not keeping up with demand, crossdock creates more options other than direct trailer services by facilitating more capacity from U.S. carriers.

  But not all crossdocks are created equal. The more loading dock doors they have, the less wait time for an arriving carrier. More dedicated space in the middle ensures freight can be immediately unloaded. Crossdocks designed to help speed up the transfer of automotive freight are also double-sided, so a Mexican truck can pull up to one side for unloading and a U.S. truck can be waiting on the other side. to the infrastructure problems and growing demand. Working with a provider that has the ability to scale up and down based on need, is crucial.

4. Expediting critical freight smoothly

A real scenario: a tier 1 supplier for two North American automakers experiences a critical problem at their primary manufacturing line, necessitating an immediate shift of raw materials to an alternate location. Ten truckloads must arrive at the new location by the next morning to keep production going and prevent the two automakers from experiencing costly downtime, idled machinery, and excess labor costs. That means the unexpected 10 truckloads must depart within a few hours.

Expediting freight for automotive supply chains is so common because they’re especially vulnerable to disruption. But achieving service reliability under those circumstances is no small feat.

• Define expectations and milestones
  Teams on the ground in key automotive manufacturing hubs in Mexico and on both sides of strategic border crossings understand the rules, regulations, and culture at the border, and can make all the difference for your supply chain.

  Consider the nuances of getting a shipment across the Mexico border. Unless shipping directly, it typically takes three trucks: a Mexico carrier brings the trailer to the border, a Mexico transfer carrier takes it across, then the freight is and reloaded onto a U.S. carrier’s trailer. Don’t trust just-in-time parts delivery to a logistics provider that can only pull that off at one crossing.

  In order to mitigate the variability of the border in times of disruption, whether due to technology issues, DOT inspections, inclement weather, or geopolitical unrest, it’s important to have options for diverting freight to other points along the border to avoid the lines of trucks backed up for miles.

• Tap into flexible, scalable capacity
  The process of unloading freight after it crosses the border and reloading it onto a U.S. carrier’s trailer happens at crossdock facilities. With the growth in nearshoring and cross-border loads—with more to come in the years to come—the crossdock is a premium space for shippers to boost throughput. Not keeping up with demand, crossdock creates more options other than direct trailer services by facilitating more capacity from U.S. carriers.

  But not all crossdocks are created equal. The more loading dock doors they have, the less wait time for an arriving carrier. More dedicated space in the middle ensures freight can be immediately unloaded. Crossdocks designed to help speed up the transfer of automotive freight are also double-sided, so a Mexican truck can pull up to one side for unloading and a U.S. truck can be waiting on the other side. to the infrastructure problems and growing demand. Working with a provider that has the ability to scale up and down based on need, is crucial.

• Get tailored problem-solving through repeatable processes
  

  Having a team of experts that understands the unique challenges of the automotive business is key to tailoring expedited freight moves. For example, when much of the auto industry is dependent on manufacturing in Mexico, a logistics provider always needs to be ready to avert parts shortages when border crossings are shut down or backlogged.

  If some stock is stranded, other stock that has already crossed the border can be split and rerouted to multiple sites to provide a buffer, while stock that has yet to cross the border can be diverted to air charters. Consistent and repeatable processes make it faster to evaluate the situation and execute the solution

Building a resilient automotive supply chain

Visibility is crucial at all levels of the automotive supply chain— tracking shipments, items, and quantities, adjusting plans, optimizing labor, and mitigating issues proactively. This level of visibility requires connectivity throughout the supply chain, all supported by knowledgeable people.

Large-scale EDI and API models, ERP systems, transport and warehouse management systems, mobile apps, and electronic logging devices (ELDs) all help create a comprehensive visibility platform, becoming a single source of truth. In turn, a logistics or TMS provider can provide or unite the data across these. To future-proof their supply chains, carmakers and automotive parts manufacturers must seek logistics providers with strong, integrated global networks offering flexibility across modes, scalable capacity, end-to-end transparency, and automotive experts that act as an extension of their team.

What to look for in an automotive logistics provider

1. Automotive logistics talent, available on the ground 24/7
2. Proactive culture and communication
3. Expertise in supply chain analysis and design
4. Integrated services to flex across ocean, air, rail, and truck shipping plus specialized services such as transloading, consolidation, and warehousing
5. A deep global carrier network and local expertise in key automotive markets
6. Ability to optimize shipments by mode of transport, load, and carrier
7. End-to-end supply chain visibility with predictive analytics, accurate ETAs, and upstream purchase order management
8. Tools to connect data across suppliers, inventory/warehouse management systems, geographies, and legs of transport
9. Cross-border experience, facilities, and services such as automotive customs brokerage
10. Established and repeatable processes to mitigate risk, minimize disruptions, and expedite freight when needed